Everything you need to know about Crowdcube

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Brief TimelineA Brief History of Crowdcube

Crowdcube was launched in February 2011 by Darren Westlake and Luke Lang, becoming the first equity crowdfunding platform. In January 2012, Crowdcube were invited to attend a meeting at 10 Downing Street to discuss Crowdfunding and the suitability of current legislation for 21st century financing methods. In February 2013, Crowdcube received an accreditation from the FCA. In December 2018, Crowdcube hosted the largest crowdfunding campaign in history to date, with digital challenger bank Monzo raising £20m with over 36,000 investors.

Since its inception, campaigns hosted on Crowdcube have raised over £1 billion.

Joining Crowdcube

You can apply to raise with Crowdcube if:

  • Your business is a UK or Irish limited company (not an LLP or Sole Trader);
  • Your business isn’t involved in anything of a sexual nature, property development or filmmaking/theatrical productions;
  • Your business has a valid, active Companies House number. The requirement to be a UK or Irish limited company is not stringent, however, and Crowdcube will also consider some companies that are based in Europe. Crowdcube will also review the structure of your company; the nature of your existing shareholders; and Director corporate and financial history.
  • The minimum amount you can raise with Crowdcube is £150k.

Once your preliminary application has been accepted and you’ve submitted your pitch, Crowdcube will conduct verifications on your business. You will be asked to provide some basic legal, financial and compliance information for review. Crowdcube will also request “third-party supporting evidence to validate any material factual statements that are made in your pitch”. User-generated sources such as LinkedIn, CVs and personal calculations, are not accepted. When conducting Director checks, Crowdcube will perform Know Your Customer (KYC) checks to confirm the identities of Directors as well as credit checks to confirm there aren’t any outstanding CCJs or bankruptcies on any of the company directors and persons of significant control. It is also worth noting that Crowdcube does not sign an NDA with companies that are seeking to raise finance on its platform.

Crowdcube offers both a direct and nominee investment structure, as well as a combination of the two. While a direct structure may enable you to foster a stronger relationship with your investors, a nominee structure reduces the administrative burden as Crowdcube will act as the sole legal shareholder.

For their services, Crowdcube charges a 7% success fee on the successfully raised funds only. They also charge a completion fee ranging from 0.75% to 1.25% of all raised funds and a payment processing fee ranging from 0.47% to 2.9%.

Hosting a Campaign on Crowdcube

After you submit your pitch, Crowdcube will review and provide feedback on it within 72 hours of submission.

Crowdcube platformOnce your pitch has been finalised, Crowdcube will verify your pitch text. As campaigns on Crowdcube are classified as “financial promotion”, they will review the copy to ensure it is “fair, clear and not misleading” and that any claims can be verified with third-party evidence. This means that statements must be substantiated, you must avoid using subjective language that is misleading or cannot be proven, you must ensure that all advertising related to your pitch adheres to the financial promotion rules, and that you are not allowed to mention financial projections anywhere on your pitch. In addition, all communications must include a risk warning.

On Crowdcube, your pitch can remain in private mode for a substantial period of time (initially 30 days which can be extended) until you reach a certain amount of investment from your private network, which will have been agreed upon between yourself and the campaign manager assigned to you by Crowdcube. Once your campaign goes live you will have 30 days to reach your target. Crowdcube operates on an all or nothing basis – if your campaign does not reach its target amount, all the money you have raised thus far will be refunded to investors.

Once your campaign is live, you will have a personal entrepreneur dashboard from which you can manage your campaign. It enables you to view key stats related to your pitch, post an update on your pitch page, access data and analytics, view and interact with the pitch forum, and email all your investors. It also offers information on the marketing channels investments in your pitch are coming from, insights and resources, campaign reminders, and free marketing tools. You will also be provided with a daily campaign performance report which displays pitch visits, unique pitch visits, total investment, investment received the previous day, number of investments made the previous day, your daily target, the average amount invested daily, and the days since your last pitch update.

If you believe your campaign will not hit its target before the expiry date, then you may request a pitch extension 5 or more days before the campaign is due to expire. You must provide a valid reason for why your pitch should be extended.

Marketing your Crowdcube Campaign

Crowdcube will provide you with marketing and promotion support, primarily through targeted emails and newsletters. However, they state that the amount of marketing your pitch receives is dependent on the volume of traffic and activity on your pitch. Therefore, the more traffic on your pitch page, the more exposure it will receive through Crowdcube’s marketing.

The marketing support provided by Crowdcube alone will not be enough to achieve a successful crowdfund. You will need to commit a lot of your own time, energy and resources to ensure a successful crowdfunding campaign. You can read about how to succeed at Crowdfunding on our Crowdfunding Hub here.

Raising Funds on Crowdcube

raising fundsThere is no set limit to how much can be raised on Crowdcube, however, companies can raise up to £8m before having to submit a full prospectus. Post-Brexit though, companies can raise up to £16m in total by completing one raise with UK investors and another with EU investors.

With Crowdcube, you can offer investors both A Ordinary shares and B Investment shares. You can set the threshold of investment required in order to obtain A Ordinary shares.

Once your campaign has reached its funding target, it will go into overfunding. When you accept further overfunding investment, additional equity in the business will be proportionally released until you choose to close your pitch.

Crowdcube also offers you the option to conduct a convertible raise. While similar to an equity campaign, with a convertible raise, the company doesn’t need to set a valuation or a share price. Investments are collected by Crowdcube and transferred to the company. At a future date, this investment will be converted into shares.

Closing your Campaign

Once the campaign hits its target, the completions process will begin. This process usually takes up to a month and includes: a legal review, anti-money laundering checks, cooling off period for investors, approvals and completion formalities, payment capture, share issue, and finally a tax relief application.

The process for receiving your raised funds begins after your campaign closes. The first step is for Crowdcube to complete its post-funding due diligence, after which they will send a cooling off email to investors allowing them usually 7 days to withdraw their investment. The funds will then be collected within 2 – 3 working days and the process of capturing funds takes between 5 – 7 working days.

You can also agree for shares in your company to be traded on Cubex, Crowdcube’s own secondary shares market. Agreeing to your shares being traded on Cubex should not affect your business or your funding round in any way.

Once your campaign has reached a successful close you will be eligible to join the Crowdcube Funded Club. As a member, Crowdcube will share the story of your successful raise on their blog and social channels, and you will be given access to Crowdcube’s Growth Services network which provides access to services ranging from marketing, recruitment and financial services.

Thinking of including a Crowdcube crowdfunding campaign in your investment strategy? Check out more tips and insight in our Crowdfunding Hub.